The Temporary Madness of an Ugly Mathematics World

There are obvious contradictions in government finance that are both shocking and absurd. There are opposing forces colliding before us with consequences hardly a soul can escape. To sum up the plot, there’s the soft delusion of prosperity through public spending running up against the hard reality of arithmetic.

The climax, and its brutal impartiality, is still a scene or two away. But once the inflection point is reached chaos and disorder will follow. This is the unfavorable place inhabitants of western nations find themselves these days.

“Beauty is the first test: there is no permanent place in this world for ugly mathematics,” wrote British number theorist Godfrey Hardy in 1941. When making this observation, Hardy didn’t likely have a fiat money world in mind…where the government borrows money created by the central bank to pay for things the economy can’t afford.

If Hardy could’ve taken a gander at the mammoth gap between government revenues and obligations, circa 2012, we guess he’d have concluded the Treasury is engaged in a serious case of ugly mathematics. No doubt, this is the sort of ugly mathematics that “there is no permanent place in this world for.”

In time, the great default will occur. That’s when the hard reality of arithmetic will eradicate the ugly mathematics of the Treasury from this world. Until then, the government’s financial balance sheet will continue to get uglier.

Spending Money on Stuff

The last time the Congress passed a budget was on April 29, 2009. According to the Congressional Budget Act of 1974, Congress is supposed to adopt annual budget resolutions that set limits on revenues and spending. Without a budget, the government has no plan in place to guide how money is spent.

The fact is, the federal government’s blindly spending money on stuff. That’s how Congress likes it. They like to spend gobs of money without limits or restrictions. They don’t give a rip if the country can afford it…they just keep spending money to get reelected.

Unfortunately, this has created a precarious situation where nearly half of the population’s dependent on the government for assistance. But the way the government pays for all the assistance is by borrowing freshly created money from the Federal Reserve. Tax revenue covers only about half of the spending. The other half is made up with new debt.

Year after year the deficits stack up on top of the national debt like a wobbly Jenga edifice. What will happen to the 49 percent of American households who receive government assistance when it topples over?

Clearly, when the checks stop showing up each month it won’t take long before the collective bellies of the 46.6 million people enrolled in the Supplemental Nutrition Assistance Program ache with hunger pangs. When this happens, will they pull themselves up by their bootstraps and do whatever it takes to earn an honest day’s pay? Or have they become so handicapped by all the handouts from the government that they resort to crime and theft to acquire something to eat?

How could the country possibly need so many new regulations? Does anyone in government really know what all these proposed new laws are all about? How will the economy be impacted by all these new regulations?

Of course, each one of these new laws will require money – your money – to implement. They’ll also require an army of bureaucrats to enforce. On top of that they’ll waste a bunch of everyone’s time filling out forms. Plus each form will have a fee.

Obviously, the federal government’s addicted to spending money and making regulations. They can’t stop. Yet the more they spend, and the more regulations they pass, the weaker the economy becomes.

You see, when the government spends money, the money doesn’t go to productive uses. It goes to dependents and agency staffers. These people are not adding value to the world through their time, talents, or labor. They merely consume the capital…when the money’s gone, they need more from someone else to consume.

Then there’s the madness of the unfunded liabilities of Social Security, Medicare, and Medicaid…all are bleeding red. For now, the Treasury band aides over the red by selling treasury notes. This requires ever increasing amounts of debt. Do you see the problem?

Alas, we are living in the temporary madness of an ugly mathematics world.